CJ52.7 

W64t 


The  Transit   Problems 

of  New  York  City 


An  Analysis  of  the  Diffi- 
culties in  the  Way  of  the 
Continuation  of  the  Policy 
of  Private  Ownership  and 
Operation,  and  of  the  Obsta- 
cles to  be  removed  in  Prep- 
aration for  Successful  Public 
Ownership     and    Operation 


8061  '«  NVf  lVd 

•SOJ9  P-»°l*B0 


v: 


TRANSIT  PROBLEMS  o/NEW  YORK  CITY 

An  analysis  of  the  difficulties  in  the  way  of  the  con- 
tinuation of  the  policy  of  private  ownership  and  opera- 
tion, and  of  the  obstacles  to  be  removed  in  prep- 
aration for  successful  public  oivnership  and  operation. 

IN  1916  the  threatened  strike  on  the  steam  railroads  of  the  United 
States  was  looked  upon  as  a  prospective  calamity  comparable  only 
to  war  itself.     A  strike  was  averted  by  the  concessions  to  labor 
effected  through  the  Adamson  law.     At  the  same  time  New  York  ex- 
perienced the  effect  of  strikes  on  the  Interborough  Rapid  Transit  Lines 
and  on  the  surface  lines  of  Manhattan  and  The  Bronx.    Following  these 
transit  disturbances,  public  attention  was  directed  to  the  problem  of  de- 
vising some  effective  means  for  the  prevention  of  strikes  on  local  trans- 
portation lines.    The  Public  Service  Commission  for  the  First  District 
and  the  Merchants'  Association  of  New  York,  each  put  forth  a  plan  for 
legislation   on  this  subject.     But  public  discussion  of  these  plans  de- 
veloped great  differences  of  opinion,  and  when  the  United  States  entered 
the  war,  the  matter  was  dropped  for  the  time  being  so  far  as  the  state  and 
local  authorities  were  concerned.    The  avoidance  of  labor  disturbances, 
even  in  local  industries,  suddenly  became  a  national  problem.     The 
supreme  peril  of  the  war  crisis  called  imperatively  for  efficient  coopera- 
tion of  all  the  industries  essential  to  the  war  program  and  gave  warning 
that  street  car  strikes  and  the  resulting  paralysis  of  business  could  not 
be  tolerated.     The  National  War  Labor  Board  was  established   and 
although   its   activity   did  not  entirely   prevent  street  railway   strikes 
during  the  year  when  it  was  actively  functioning  it  kept  them  in  most 
eases  from  becoming  serious.     Public  order  and  uninterrupted  service 
were  generally  preserved.     These  results,  however,  were  accomplished 
through  the  adoption  of  a  liberal  wage  policy,  by  which  the  employes 
received,  in  some  cases,  even  more  than  they  asked.    Labor  was  kept  in 
the  harness;  but  the  employing  companies  were  driven  into  bankruptcy, 
or  brought  to  the  very  verge  of  it.    Since  the  War  Labor  Board  brought 
its  active  work  to  a  close  about  July  1,  1919,  the  high  cost  of  living  has 
led  to  demands  for  still  higher  wages,  and  there  has  been  an  epidemic 


M- 


2  THE  TRANSIT  PROBLEMS  OF  NEW  YORK  CITY 

of  street  railway  strikes  to  enforce  these  demands.  In  many  cases  the 
men  have  won  large  additional  increases  in  wages,  and  the  financial 
condition  of  the  companies  has  become  more  desperate  than  ever. 

The  National  War  Labor  Board  was  without  power  to  increase  the 
companies'  revenues  by  raising  the  fares,  but  it  went  as  far  as  it  could 
with  moral  suasion  to  induce  the  state  and  local  authorities  to  grant 
rate  increases  without  inquiring  too  closely  into  questions  of  past  history 
and  overcapitalization.  But  even  where  this  advice  was  followed,  the 
companies  have  secured  insufficient  relief,  and  their  experience  thus  far 
raises  a  grave  question  as  to  whether,  with  the  present  high  cost  of  labor 
and  materials,  the  street  railway  business  can  be  made  both  self-sustain- 
ing and  publicly  efficient  at  any  rate  of  fare  that  may  be  charged.  Cer- 
tainly, this  cannot  be  done  without  a  radical  scaling  down  of  fixed 
charges  where  they  are  excessive  and  radical  economies  in  operation 
where  they  can  be  effected  without  impairment  of  the  service.  The 
financial  problems  of  the  street  railway  business  were  sharply  accentu- 
ated and  brought  to  a  grave  crisis  by  the  wage  increases.  Present 
financial  conditions  cannot  continue  indefinitely.  With  the  war  over, 
fare  increases  are  likely  to  be  increasingly  unpopular  as  time  goes  on; 
and  they  will  be  ineffective  largely  in  proportion  to  their  unpopularity. 

The  pressure  for  a  substantial  reduction  in  wages  as  a  means  of  reducing 
the  cost  of  street  railway  service,  and  of  enabling  the  companies;  to  live, 
has  not  yet  made  itself  widely  felt,  as  the  men  are  still  demanding  more, 
but  when  labor  conditions  change  the  pressure  for  a  reduction  of  wages 
will  be  tremendous.  This  pressure  will  be  strongly  resisted.  The  situation 
is  preparing  for  an  industrial  war  in  the  street  railway  business  unprece- 
dented in  extent.  Almost  always  in  the  past  a  transit  strike  has  been  the 
signal  for  the  release  of  elemental  passions  and  the  temporary  subversion 
of  public  order,  and  the  danger  from  street  railway  strikes  during  the 
period  just  before  us  is  greater  than  it  ever  was  before,  unless  the  present 
wage  rates  are  left  unmolested.  Financial  bankruptcy  and  industrial 
chaos  are  the  two  horns  of  the  street  railway  dilemma.  The  economic 
problem  of  street  railway  transportation  presents  a  task  of  the  first 
magnitude — urgent,  insistent,  threatening,  dangerous  to  a  degree. 

Street  railway  service  must  be  preserved.  Street  railway  strikes  must 
be  prevented.  But  every  man  who  thinks  will  recognize  the  fact  that 
street  railway  companies  cannot  render  service  unless  they  are  paid 
what  it  costs,  and  that  street  railway  employes  cannot  be  forbidden  to 
strike  unless  their  legitimate  interests  as  employes  are  effectively  taken 
under  public  protection,  so  that  the  strike  will  not  be  a  necessity  to  them 
in  their  efforts  to  procure  or  retain  just  compensation  and  reasonable 
hours  and  conditions  of  employment.  If  the  control  of  the  rates  of  com- 
pensation to  be  paid  to  the  employes  is  taken  out  of  the  hands  of  the 


THE  TRANSIT  PROBLEMS  OF  NEW  YORK  CITY  3 

employing  street  railway  companies  in  order  to  insure  a  fair  deal  to  the 
employes,  obviously  a  power  is  placed  in  the  hands  of  some  outside  agency 
so  to  increase  the  costs  of  operation  through  increases  in  wages  as  to 
bankrupt  the  companies,  unless  the  companies  have  some  means  of 
transferring  to  the  fare-paying  or  the  tax-paying  public  these  additional 
burdens  of  cost  if  they  become  excessive.  This  is  well  illustrated  by  the 
results  of  the  War  Labor  Board's  policies. 

Of  course,  in  particular  cases,  profits  under  the  old  wage  scales  and 
with  the  old  rates  for  service  may  have  been  sufficient  so  that  the  com- 
panies can  pay  the  higher  wages  without  requiring  an  increase  of  rates. 
But  if,  prior  to  the  increase  in  wages,  the  rates  charged  have  been  regu- 
lated so  as  not  to  yield  more  than  a  fair  return  to  a  company,  a  large 
increase  in  the  cost  of  labor,  unless  accompanied  by  corresponding  sav- 
ings elsewhere,  will  place  upon  the  company  a  burden  which  it  cannot 
properly  be  asked  to  bear,  and  which  it  may  be  unable  to  bear,  even  if 
asked.  The  full  cost  of  public  utility  service  must  in  the  long  run  be 
borne  by  the  public  either  through  the  rates,  through  special  assessments 
or  through  subsidies  from  taxation.  It  is  clear,  therefore,  that  the  prob- 
lem of  preventing  strikes  cannot  properly  be  handled  by  itself,  but  must 
be  handled,  if  at  all,  as  a  part  of  a  general  program  covering  the  whole 
subject  of  street  railway  service  and  of  the  financial  relations  between  the 
street  railways  on  the  one  hand  and  the  public  which  they  serve  on  the 
other.  It  is  inconceivable  that  arbitrary  power  should  be  given  to  an 
outside  agency  to  put  upon  the  operating  companies  unlimited  increases 
in  cost,  unless  the  operating  companies  are  permitted  through  some 
recognized  procedure  to  seek  and,  if  necessary,  obtain,  the  additional 
revenues  required  by  such  increases  in  cost. 

These  considerations  lead  to  an  analysis  of  the  entire  public  utility 
situation  as  it  affects  the  problem  of  urban  transit  in  New  York. 

Local  transit  service  is  a  public  necessity  in  great  cities.  Street  rail- 
ways were  introduced  into  New>  York  almost  ninety  years  ago  and  their 
importance  as  a  factor  in  the  city's  development  and  in  its  daily  social 
and  business  life  has  been  constantly  increasing.  To-day  in  this  one  city 
they  represent  a  book  cost  of  a  billion  dollars  and  during  the  course  of  a 
year  they  carry  two  billion  passengers.  The  citizens  of  New  York  and 
the  sojourners  in  their  midst  pay  $110,000,000  annually  in  local  carfares. 
These  facts  point  to  the  overwhelming  necessity  for  uninterrupted  transit 
service  in  New  York.  In  smaller  cities  the  advent  and  enormous  de- 
velopment of  the  automobile  have  to  a  certain  extent  taken  the  edge  off 
the  necessity  for  uninterrupted  street  railway  service.  In  a  city  of  a 
hundred  thousand  or  even  of  several  hundred  thousand  population,  a  com- 
plete street  car  tie-up  for  a  temporary  period  is  not  quite  so  serious  from 
the  point  of  view  of  the  public  as  it  was  fifteen  or  twenty  years  ago;  for 


4  THE  TRANSIT  PROBLEMS  OF  NEW  YORK  CITY 

the  thousands  of  private  automobiles  are  immediately  impressed  into 
service  as  free  common  carriers  and  the  city  gets  along,  in  a  lame  sort  of 
way,  without  any  street  cars  running.  Still,  even  in  such  cities,  the  tem- 
porary discontinuance  of  street  railway  service  is  a  great  inconvenience  to 
the  people  and  may  be  a  public  calamity.  In  New  York,  with  its  great 
distances  and  its  enormous  volume  of  traffic,  the  results  of  a  complete 
suspension  of  street  car  and  rapid  transit  service  for  a  single  working 
day  would  be  disastrous. 

Certain  fundamental  assumptions  may  be  made  and  certain  con- 
clusions therefrom  stated,  which  will  be  generally  accepted  without 
further  argument.    These  assumptions  are: 

(a)  That  street  railway  transit  service  is  a  public  necessity  in  the 
City  of  New  York. 

(b)  That  such  transit  service  must  be  uninterrupted. 

(c)  That  the  necessity  for  uninterrupted  service  is  so  great  as  to  cast 
upon  the  community  as  a  whole  the  responsibility  for  seeing  that  it  is 
provided. 

If  these  assumptions  are  correct  then  these  conclusions  follow: 

(d)  That  transit  service  in  New  York  must  not  be  permitted  to  break 
down,  either  through  the  deterioration  of  transit  facilities,  or  through  the 
lack  of  financial  means  to  maintain  and  operate  them  so  as  to  give 
adequate  service. 

(e)  That  strikes  tending  to  an  interruption  of  transit  service  must 
be  prevented. 

(f)  That  the  municipality  or  some  other  public  agency  must  be  pre- 
pared to  provide  the  required  service  through  public  ownership  and 
operation  if  other  means  fail. 

Thus  far,  transit  service  in  New  York  has  been  secured  mainly 
through  private  ownership  and  private  operation.  Still,  the  principle  of 
public  ownership  has  been  accepted  in  the  case  of  the  bridges,  the  munici- 
pal ferries  and  the  subways  with  their  elevated  extensions,  and  the  prin- 
ciple of  municipal  operation  was  recognized  for  many  years  in  connection 
with  the  shuttle  service  on  the  Brooklyn  Bridge  and  has  more  recently 
been  recognized  in  the  case  of  the  ferries  to  South  Brooklyn  and  Staten 
Island.  Under  these  conditions  the  first  fundamental  question  to  be 
answered  is  whether  it  is  possible  to  secure  adequate,  uninterrupted 
transit  service,  such  as  the  city  requires,  through  a  continuation  and  de- 
velopment of  the  present  system  of  private  ownership  and  operation.  If 
our  assumption  as  to  the  necessity  of  the  service  is  correct,  then  in  case 
the  difficulties  in  the  way  of  securing  it  through  a  continuation  and  de- 


THE  TRANSIT  PROBLEMS  OF  NEW  YORK  CITY  5 

velopment  of  private  ownership  and  operation  are  found  to  be  insuperable, 
it  will  be  necessary  to  resort  to  public  ownership  and  operation,  no  matter 
what  difficulties  have  to  be  overcome  in  bringing  it  about. 

DIFFICULTIES  IN  THE  WAY  OF  SUCCESS  WITH  PRIVATE  OWNERSHIP  AND 

OPERATION 

We  may  consider  first,  therefore,  what  are  the  essential  obstacles  to 
the  successful  development  of  private  ownership  and  operation  as  a  means 
for  securing  the  necessary  service  in  the  future.  We  may  enumerate  the 
following: 

(1)  The  fixed  5-cent  fare.  Under  the  constitution  and  present  laws 
of  New  York  as  interpreted  by  the  Court  of  Appeals  in  the  Quinby 
(Rochester)  case,  the  5-cent  fare  stipulated  in  the  franchise  ordinances 
and  contracts  cannot  be  changed  without  the  consent  of  the  municipal 
authorities.  Even  the  court's  later  decisions  in  the  South  Glens  Falls 
case  and  the  Buffalo  case  leave  it  uncertain  whether  the  Public  Service 
Commission  can  be  given  authority  to  increase  street  railway  fares  in 
New  York  City  against  the  opposition  of  the  Board  of  Estimate  and 
Apportionment  where  the  present  rates  are  based  upon  local  franchise 
contracts.  This  issue  as  to  whether  this  power  has  already  been  con- 
ferred on  the  Public  Service  Commission  has  been  definitely  raised  be- 
tween that  body  and  the  City  administration  in  the  cases  of  the  New 
York  &  North  Shore  Traction  Company  and  the  Manhattan  &  Queens 
Traction  Corporation.  The  public  authorities  are  also  at  odds  over  the 
transfer  charges  authorized  by  the  commission  at  points  not  clearly 
covered  by  franchise  contracts  requiring  free  transfers.  What  might  be 
called  the  purely  political  difficulties  in  the  way  of  permitting  an  in- 
crease of  fares  on  the  surface  street  railway  lines  in  New  York  are  by 
no  means  slight,  especially  under  private  ownership.  But  if  these  diffi- 
culties be  overcome,  we  should  still  be  confronted  with  the  fact  that  such 
an  increase,  to  give  effective  relief  to  any  particular  street  railway 
company,  must  apply  to  all  competing  surface  and  rapid  transit  lines. 
For  example,  to  raise  the  fares  on  the  surface  lines  of  Manhattan  with- 
out raising  them  on  the  subway  and  elevated  lines  would  be  obviously 
futile  as  a  method  of  bringing  financial  relief  to  the  surface  lines.  The 
City,  after  many  years  of  public  agitation  and  negotiation,  has  put  or  is 
pledged  to  put  nearly  $250,000,000  of  public  money  into  new  rapid  transit 
lines  for  the  very  purpose  of  securing  the  continuation  of  the  5-cent 
fare  and  a  wide  extension  of  the  area  to  which  it  formerly  applied.  The 
existing  transit  lines  of  the  city  are  owned  by  nearly  sixty  different 
companies,  and  are  operated  by  about  thirty-five,  though  most  of  the 
latter,  until  the  recent  partial  disintegration  of  the  Manhattan  and 
Brooklyn  surface  car  systems,  were  combined  into  the  three  big  groups 
dominated  by  the  interests  that  control  the  Interborough  Rapid  Transit 


6  THE  TRANSIT  PROBLEMS  OF  NEW  YORK  CITY 

Company,  the  Brooklyn  Rapid  Transit  Company  and  the  Third  Avenue 
Railway  Company,  respectively.  Under  these  circumstances,  with  the 
financial  condition  of  each  separate  company  depending  upon  its  own 
operating  expenses,  fixed  charges  and  revenues  from  traffic,  without 
respect  to  the  operating  expenses,  fixed  charges  and  revenues  of  the  other 
companies,  a  uniform  increase  in  fares  would  certainly  give  either  too 
much  relief  to  some  of  the  companies  or  too  little  to  others ;  while  an  in- 
crease that  was  not  uniform  would  result  in  shifting  the  traffic  between 
competing  systems  so  as  to  destroy  the  financial  benefits  which  the  in- 
crease was  designed  to  confer  and  at  the  same  time  create  intolerable  dis- 
turbances in  service.  It  is  clear,  therefore,  that  if  an  attempt  were  made 
to  apply  the  service-at-cost  plan,  which  has  been  adopted  in  one  form  or 
another  in  Cleveland.  Montreal,  Boston  and  Cincinnati,  the  desired  re- 
sults could  not  now  be  secured  because  the  street  railway  lines  in  New 
York  are  diversely  owned  and  operated,  whereas  the  service-at-cost  plan, 
to  be  successful,  must  apply  to  a  unified  local  system,  thus  avoiding  the 
effects  of  competition  combined  with  differential  rates  of  fares.  For  the 
reasons  given,  the  measure  of  relief  that  can  be  secured  by  the  street 
railway  companies  of  New  York,  no  matter  how  bad  their  financial  con- 
dition may  become,  by  means  of  an  increase  in  the  rates  of  fare,  is  very 
uncertain. 

(2)  Increased  length  of  ride.  Another  difficulty  encountered  by  the 
local  transit  companies  is  the  increasing  length  of  haul  which  has  resulted 
from  the  great  expansion  of  the  city  and  the  lengthening  and  consolida- 
tion of  street  railway  lines.  It  would  require  a  very  careful  investigation 
to  determine  even  approximately  the  average  length  of  haul  at  the  present 
time  as  compared  with,  say,  the  year  1900.  It  may  be  that  the  increase 
in  short-haul  traffic  largely  offsets  the  increase  in  long-haul  traffic.  If 
so,  it  is  of  the  greatest  importance  from  the  financial  point  of  view  that 
the  short-haul  traffic  should  be  preserved  and  developed.  Any  increase 
in  uniform  unit  fares  tends  to  drive  away  short-haul  traffic  and  thus  to 
increase  the  average  length  of  ride  and  to  defeat  its  purpose  so  far  as 
financial  relief  of  the  operating  companies  is  concerned.  The  adoption 
of  a  zoning  system,  if  practicable  under  New  York  conditions,  might 
preserve  the  short-haul  traffic  for  the  surface  cars;  but  the  doubling  or 
trebling  of  fares  for  long-distance  riders  on  the  rapid  transit  lines  would 
involve  a  radical  reversal  of  the  city's  policy  and  would  undoubtedly 
promote  congestion  of  population  and  retard  the  development  of  the 
outlying  areas  which  the  dual  subway  system  was  designed  primarily  to 
serve. 

(3)  Labor  cost.  As  a  result  of  war  conditions  and  the  policy  adopted 
by  the  National  War  Labor  Board,  street  railway  wages  were  radi- 
cally increased  throughout  the  country,  and  the  position  of  the  unions 
was  strengthened  so  that  it  is  problematical  to  what  extent,  if  any, 


THE  TRANSIT  PROBLEMS  OF  NEW  YORK  CITY  7 

the  wages  now  being  paid,  especially  to  trainmen,  will  be  reduced  as  nor- 
mal conditions  are  restored  in  the  future.  There  is  a  widespread  belief  that 
street  railway  employes  were  paid  too  little  before  the  war  and  it  is  not 
at  all  likely  that  the  public  would  approve  a  policy  that  would  put  them 
back  in  their  pre-war  status.  Moreover,  there  seems  to  be  no.  immediate 
likelihood  of  a  reduction  in  the  cost  of  living  that  would  warrant  a  re- 
duction in  wages.  If  the  figures  given  out  on  behalf  of  the  Inter- 
borough  Rapid  Transit  Company  and  the  New  York  Railways 
Company  can  be  accepted  as  accurate,  the  wage  increases  made  effective 
between  January  1,  1916,  and,  say,  March  31,  1919,  represented  an  in- 
creased cost  of  about  81/100  of  a  cent  per  revenue  passenger  on  the 
subway  and  elevated  lines  and  of  about  1.15  cents  per  revenue  passenger 
on  the  surface  lines.  The  additional  25%  increase  in  wages  granted  in 
August,  1919,  must  bring  these  figures  up  to  about  a  cent  and  a  half 
per  revenue  passenger  on  the  I.  R.  T.  lines. 

It  appears  inevitable  that  for  an  indefinite  period  in  the  future  the 
wages  of  labor  used  in  street  railway  operation  will  be  greatly  in  excess 
of  what  they  were  before  the  war.  The  aggregate  cost  of  labor  will 
remain  high  unless  one-man  cars  are  introduced  to  cut  down  the  total 
number  of  men  employed;  but  even  if  this  economy  can  be  effected  in 
New  York,  it  will  apply  only  to  the  surface  lines,  leaving  rapid  transit 
costs  untouched. 

(4)  High  cost  of  materials.  During  the  war  period  the  prices  of  ma- 
terials entering  into  the  maintenance  and  operation  of  street  railways, 
as  well  as  the  prices  of  construction  materials,  advanced  enormously. 
Some  of  these  prices  have  since  receded  somewhat,  and  they  may  recede 
still  more  after  the  final  establishment  of  peace,  but  it  seems  quite  un- 
likely that  they  will  get  back  to  the  pre-war  level  for  many  years  to 
come,  if  ever. 

(5)  High  cost  of  power.  The  cost  of  power  is  one  of  the  large  items 
in  operating  expenses.  It  is  dependent  chiefly  upon  the  price  of  coal  and 
the  cost  of  labor.  Wages  have  reached  a  high  level,  and,  as  already 
pointed  out,  it  is  doubtful  how  far  they  will  recede.  The  price  of 
coal  also  has  greatly  increased  and,  while  some  reduction  may  be  ex- 
pected, it  is  not  likely  that  the  price  will  get  back  to  the  old  levels. 
Freight  rates  are  up,  miners'  wages  are  up  and  the  supplies  of  coal  are 
limited.  It  seems  almost  certain  that  the  cost  of  power  will  continue 
higher  than  it  was  immediately  before  the  war,  unless  radical  changes  are 
effected  in  its  production  and  distribution.  Possibly  the  plan  for  the 
establishment  of  super-power  stations  at  the  mines,  which  has  received 
considerable  attention  from  the  British  government  as  well  as  our  own, 
as  a  means  for  the  economical  generation  and  use  of  power,  may  be 
developed  in  some  practical  way  at  some  future  time,  but  the  close  of 
the  war  and  the  withdrawal  of  the  Federal  government  from  its  war 


8  THE  TRANSIT  PROBLEMS  OF  NEW  YORK  CITY 

activities   are   likely   to  postpone  this   development  to   the   somewhat 
distant  future. 

(6)  Competition  of  motor  vehicles.  The  immense  increase  in  the 
number  of  automobiles  and  motor  cycles  in  use  in  every  urban  com- 
munity has  unquestionably  seriously  affected  the  volume  of  street  railway 
traffic.  The  special  street  railway  investigating  commission  of  the  Massa- 
chusetts legislature,  which  reported  a  year  ago,  was  of  the  opinion  that 
private  automobiles  (not  including  jitneys)  were  taking  traffic  which 
otherwise  would  go  to  the  street  railways,  amounting  to  about  12%  of 
the  total  traffic  now  being  handled  by  the  street  railways  of  that  state. 
Applied  to  the  entire  country  in  proportion  to  the  total  urban  population, 
this  Massachusetts  estimate  would  indicate  that  about  $70,000,000  a 
year  are  taken  away  from  the  street  cars  by  private  automobiles.  For 
New  York  alone  the  item  would  be  ten  or  twelve  millions  of  dollars  every 
year  on  this  basis.  If  to  the  competition  of  private  automobiles  is 
to  be  added  the  competition  of  jitneys  and  public  auto-buses,  the  effect 
upon  the  financial  condition  of  the  street  railways  will  be  very  serious 
indeed.  In  some  communities,  it  has  already  become  clear  that  the  street 
railways  and  the  jitneys  cannot  live  together  and  pay  their  way. 

(7)  Enormous  expansion  of  investment  in  transit  facilities.  While 
the  completion  of  the  new  rapid  transit  lines  will  greatly  increase  the 
traveling  conveniences  of  the  public  of  New  York  and  in  many  cases  make 
it  possible  to  travel  for  one  fare  where  two  or  three  fares  were  required 
before,  yet  the  new  investment  of  $400,000,000  does  not  supersede  the 
old  investment,  but  is  added  to  it;  therefore,  to  make  the  entire  transit 
system  of  the  city  self-sustaining,  with  the  dual  system  in  full  operation, 
it  will  be  necessary  for  the  street  railway  traffic  to  earn  about  $24,000,000 
a  year  in  additional  fixed  charges  besides  the  increased  cost  of  operating 
and  maintaining  the  additional  facilities.  At  pre-war  prices  the  burden 
imposed  by  the  dual  system  upon  traffic  would  be  very  nearly  $50,000,000 
a  year,  or  the  equivalent  of  1,000,000,000  5-cent  fares.  If  the  present 
high  operating  costs  continue  this  burden  will  be  still  greater.  In  New 
York  gross  transit  revenues  are  only  about  eleven  per  cent  per  annum  on 
the  book  investment,  whereas  in  Cleveland,  Ohio,  where  the  investment 
is  relatively  much  smaller,  they  were  as  high  as  thirty  per  cent  under  a 
three-cent  fare,  and  in  August,  1919,  with  a  five-cent  cash  fare,  eleven 
tickets  for  50  cents  and  a  transfer  charge  of  one  cent,  the  earnings  were 
at  the  rate  of  44  per  cent  of  the  capital  per  annum. 

(8)  Taxes,  paving  requirements  and  other  franchise  obligations.  The 
policy  of  the  City  and  the  State,  for  twenty  years  or  more,  has  been  to 
levy  as  large  an  amount  of  taxes  as  possible  upon  the  public  service 
corporations  having  the  use  of  the  streets.  It  is  true  that  this  policy  has 
not  been  consistently  applied  in  every  case,  but  nevertheless,  except  in  the 
case  of  the  City-owned  subways  and  their  equipment  and  the  ferries. 


THE  TRANSIT  PROBLEMS  OF  NEW  YORK  CITY  9 

there  has  been  no  public  recognition  of  the  idea  that  property  devoted  to 
public  service  while  held  by  a  private  company  should  be  relieved  in  any 
respect  from  the  full  burden  of  taxation  applicable  to  property  used  for 
private  purposes.  The  tax  burdens  of  the  local  transit  lines  of  New  York 
are  now  about  $8,000,000  a  year,  and,  with  paving  and  other  fran- 
chise obligations  added,  at  least  $10,000,000.  Taxes  and  these  other  pub- 
lic obligations  have  on  the  whole  been  steadily  increasing  and  it  seems 
unlikely  that  entire  exemption  of  these  properties  from  taxation,  or  any 
substantial  discrimination  in  their  favor,  would  receive  popular  support; 
for  past  experience  seems  to  indicate  that  so  long  as  the  private  companies 
remain  in  the  field  they  will  remain  there  for  the  purpose  of  making 
profit,  and  exemption  from  taxation  is  not  looked  upon  with  favor  in 
the  case  of  profit-making  private  enterprises. 

(9)  Standards  of  service  required.  In  New  York,  because  of  its  great 
area  and  its  immense  traffic,  high  standards  of  service  are  becoming 
more  imperative  every  year,  and  after  having  once  adopted  the  policy  of 
regulation  through  the  Public  Service  Commission,  neither  the  City  nor 
the  State  can  be  expected  voluntarily  to  permit  a  permanent  reduction  in 
the  standards  of  service,  but  on  the  contrary,  there  is  reason  to  believe 
that  the  service  requirements  will  become  more  stringent  and  imperative 
as  time  goes  on  and  as  public  necessity  increases. 

(10)  Competition  among  transit  lines.  The  fact  that  elevated  lines 
and  subways  have  been  and  are  being  constructed  in  the  same  streets 
with,  or  closely  paralleling,  existing  surface  lines  creates  a  multiplicity 
of  facilities  which,  unless  these  facilities  are  coordinated  and  operated  as 
a  unit,  tends  to  weaken  or  destroy  some  of  them.  The  present  condition 
of  the  surface  lines  of  Manhattan  illustrates  this  point. 

(11)  Diversity  of  ownership  and  operation.  We  have  already  pointed 
out  that  there  are  about  35  operating  street  railway  companies  and  nearly 
60  owning  street  railway  companies  in  New  York.  Even  where  these 
companies  have  been  brought  together  into  large  groups  under  unified 
control,  it  has  not  been  possible  to  inaugurate  all  of  the  economies  of 
unified  operation  and  the  adjustment  of  existing  facilities  so  as  to  get  the 
maximum  use  out  of  the  investment;  and  so  long  as  there  is  diversity  of 
ownership  these  conditions  will  prevail.  Free  development  is  prevented 
by  the  strangle-hold  of  underlying  leases  and  mortgages  which  prevent 
the  readjustment  and  proper  unification  of  facilities. 

(12)  Danger  of  strikes  and  interrupted  service.  So  long  as  the  transit 
facilities  of  the  city  are  privately  operated,  the  danger  of  labor  disputes, 
strikes  and  the  resulting  interruptions  of  service  will  be  imminent,  par- 
ticularly during  the  present  difficult  period  of  readjustment  following 
the  war.  Under  private  operation  whole-hearted  public  support  is  seldom 
given  to  drastic  interference  on  the  part  of  the  established  governmental 
agencies  to  keep  the  cars  running  in  case  of  a  strike.    The  danger  of 


10  THE  TRANSIT  PROBLEMS  OF  NEW  YORK  CITY 

industrial  disorders  and  of  the  paralysis  of  transportation  service  in  the 
period  directly  ahead  of  us  imposes  too  heavy  a  responsibility  to  be 
safely  borne  by  semi-private  agencies. 

(13)  Increasing  traffic  congestion.  As  the  density  of  street  traffic 
increases  in  a  great  city,  the  cost  of  maintaining  and  renewing  street 
railway  tracks  also  increases.  It  also  becomes  more  difficult  for  street 
cars  to  maintain  their  schedules  and  to  operate  at  an  economical  speed. 
The  result  is  increased  expense  for  power  and  increased  expense  for 
trainmen's  wages.  This  particular  tendency  appears  to  be  inherent  in 
the  development  of  great  cities,  and  if  checked  temporarily  by  better 
traffic  regulation  or  by  the  construction  of  subways  and  overhead  lines, 
it  will  nevertheless  persist  and  make  itself  felt  again  in  the  long  run. 

(14)  Limited  increase  in  revenues  from  increase  in  rates.  Urban 
transit  is  unquestionably  a  public  necessity  in  any  great  city;  yet  ex- 
perience shows  that  only  a  portion  of  the  traffic  ordinarily  accommodated 
by  the  street  railways  is  governed  by  necessity.  Street  railways  have 
been  built  up  on  the  theory  of  catering  to  the  convenience  traffic,  and 
experience  with  increased  rates  during  recent  times  in  different  parts  of 
the  country  has  shown  that  where  rates  are  increased  traffic  is  diminished, 
and  particularly  that  the  short-haul  traffic,  which  is  generally  the  most 
profitable  for  the  companies,  is  driven  away.  The  result  is  that  increases 
in  the  rates  of  fare  which  theoretically  should  give  20,  40,  60  or  100  per 
cent  increases  in  gross  revenues,  actually  give  far  less  than  these  percent- 
ages. There  seems  to  be  a  limit  to  the  price  that  can  be  charged  for  street 
railway  service,  if  the  street  railways  are  to  retain  their  position  as  a 
public  utility  designed  to  give  general  service.  There  is  a  psychological 
element  which  enters  in  to  upset  financial  calculations  where  increased 
fares  are  involved.  Accordingly,  the  street  railways  are  faced,  not  merely 
with  the  difficulty  of  getting  permission  to  charge  increased  rates  in  order 
to/  secure  increased  revenues,  but  also  with  the  difficulty  of  inducing  the 
people  to  ride  in  sufficient  numbers  after  the  rates  have  been  raised.  In 
other  words,  the  companies  have  no  assurance  that  any  given  increase  in 
fares  will  bring  them  through  whole.  At  best,  they  cannot  depend  upon 
such  an  increase  in  fares  to  do  them  anywhere  near  as  much  good  as  the 
percentage  increase  in  rates  would  indicate.  The  experience  of  Boston 
with  increasing  fares  is  significant.  On  July  1st  the  Board  of  Public  Trus- 
tees for  the  Boston  Elevated  Railway  Co.,  operating  the  subways,  the  ele- 
vated lines  and  the  surface  cars,  announced  that  it  would  be  necessary  to 
instal  the  10-cent  fare,  but  when  the  June  figures  became  available  it 
was  found  that  the  cost  of  service  had  already  gone  above  10  cents,  and 
with  the  public  boycott  and  the  strike  that  followed  the  introduction  of 
the  10-cent  fare,  and  with  a  further  increase  in  wages,  the  cost  of  service 
for  the  three  months  period,  July  to  September,  went  up  to  11.3  cents 
per  revenue  passenger.    In  October  it  went  down  to  9.5  cents. 


THE  TRANSIT  PROBLEMS  OF  NEW  YORK  CITY  11 

(15)  Practical  difficulties  in  the  way  of  subsidizing  private  companies. 
There  is  a  provision  in  the  state  constitution  prohibiting  a  municipality 
from  giving  money  or  property  or  lending  its  credit  to  a  private  corpora- 
tion. The  dual  subway  contracts  were  upheld  in  a  pinch  on  the  theory 
that  the  City  was  the  owner  of  the  lines  and  that  it  gave  the  companies 
no  absolute  guaranty  as  to  their  profits.  A  direct  subsidy  from  taxation 
to  make  good  any  deficits  which  might  accrue  in  the  operation  of  transit 
lines  would  almost  certainly  violate  the  constitution  as  it  stands  to-day. 
Aside  from  the  difficulty  and  delay  incident  to  securing  the  amendment 
of  the  constitution,  it  is  unquestionable  that  a  very  strong  popular  op- 
position would  be  encountered  if  an  effort  were  made  to  remove  the 
constitutional  inhibition  referred  to.  The  idea  that  the  government 
ought  not  to  levy  taxes  to  guarantee  the  profits  of  a  privately-owned  or 
privately-managed  enterprise  is  widespread  and  deep-seated.  It  can 
hardly  be  called  a  prejudice,  as  it  has  its  foundations  in  the  principles  of 
political  philosophy  to  which  the  founders  of  American  institutions 
probably  gave  more  thought  than  is  given  to  them  at  the  present  day  in 
this  country.  Probably  most  thoughtful  men  will  agree  that  the  dual 
subway  contracts  went  as  far  in  the  direction  of  loaning  public  credit  to 
private  enterprise  as  it  would  be  safe  to  go.  Indeed,  many  believe  that 
the  City  overstepped  the  bounds  set  by  good  public  policy  and  that  the 
dual  subway  contracts  would  never  have  been  approved  if  it  had  not  been 
for  the  enormous  interests  involved. 

(16)  Popular  prejudice  against  concessions  to  public  service  corpora- 
tions. Aside  from  the  specific  question  involved  in  the  granting  of  public 
subsidies,  the  public  service  corporations  of  New  York  have  long  been 
objects  of  popular  distrust.  This  is  certainly  true  of  the  transit  com- 
panies. Public  hostility  is  of  long  standing  and  has  become  very  deep- 
seated.  Corruption  in  the  relations  between  the  transit  companies  and 
the  public  authorities  in  the  old  times,  overcapitalization,  the  juggling  of 
transit  securities,  and  overcrowding  on  the  cars  and  other  features  of 
inadequate  service  are  all  responsible,  though  in  different  measure,  for 
this  feeling  of  hostility.  If  the  feeling  were  local  to  New  York  it  might 
be  within  the  realm  of  hope  to  overcome  it,  but  observation  and  experi- 
ence show  that  the  feeling  against  street  railway  companies  is  almost 
universal  in  the  cities  of  the  United  States.  It  would  be  extremely 
difficult,  therefore,  to  secure  popular  approval  of  any  modification  of  the 
transit  companies'  contracts  or  any  new  agreements  with  them  which 
were  based  upon  the  theory  of  mutual  interest  and  the  honor  that  should 
characterize  a  partnership  in  the  performance  of  a  public  function. 

If  it  be  assumed  that  the  continuation  and  further  development  of 
transit  service  in  New  York  is  essential  to  the  public  welfare,  and  if  the 
difficulties  in  the  way  of  future  success  of  private  ownership  and  opera- 
tion, as  above  outlined,  are  seen  to  be  insuperable,  then  we  are  driven  to 


12  THE  TRANSIT  PROBLEMS  OF  NEW  YORK  CITY 

the  conclusion  that  public  ownership  and  operation  furnish  the  only 
solution  of  the  problem.  Many  are  of  the  opinion  that  inasmuch  as 
transit  is  now  recognized  to  be  a  public  function,  vital  in  the  highest 
degree  to  the  welfare  of  the  community,  we  ought  not  to  look  upon  public 
ownership  and  operation  as  a  policy  to  be  adopted  only  as  a  last  resort. 
They  are  of  the  opinion  that  the  normal  way  of  performing  public  func- 
tions is  through  public  agencies  and  that  whatever  may  be  the  extent  of 
the  City's  present  disabilities  with  respect  to  public  ownership  and  opera- 
tion, it  is  essential  to  the  development  of  efficient  democracy  that  the 
City  should  prepare  itself  as  quickly  and  as  fully  as  possible  to  undertake 
the  performance  of  this  function,  rather  than  continue  indefinitely  to  lean 
upon  the  broken  reed  of  private  operation  with  such  public  control  as  can 
be  secured.  But  whatever  our  philosophy  may  be  with  respect  to  the 
City's  attitude  toward  the  ownership  and  operation  of  the  transit  lines 
so  long  as  a  choice  between  private  and  public  operation  remains  open, 
we  reach  common  ground  when  the  difficulties  in  the  way  of  private 
ownership  and  operation  develop  to  a  point  where  they  are  seen  by  all 
parties  to  be  insuperable.  We  believe  that  this  condition  has  "come  to 
pass"  in  New  York,  and  that  now  it  behooves  all  men  who  are  interested 
in  the  welfare  of  their  city  to  unite  in  an  effort  to  analyze,  understand 
and  overcome  the  difficulties  in  the  way  of  successful  public  ownership 
and  operation.  No  honest  and  thoughtful  advocate  of  this  policy  is  in- 
clined to  minimize  those  difficulties.  Our  first  job  is  to  understand  them. 
It  will  be  found  that  many  of  the  difficulties  already  enumerated  as 
standing  in  the  way  of  successful  private  ownership  and  operation  will 
also  militate  against  the  success  of  public  ownership  and  operation,  but 
where  a  hard  job  must  be  done,  it  seems  reasonable  that  the  party — in 
this  case  the  city — ultimately  responsible  for  getting  it  done,  will  have  a 
better  chance  of  success  if  it  is  free  to  tackle  the  job  directly  instead  of 
trying  to  do  it  through  other  agencies  whose  interests  are  divergent  from, 
and  in  some  respects  irreconcilable  with,  the  public  interests. 

DIFFICULTIES  TO  BE  OVERCOME  IN  PREPARATION  FOR  MUNICIPAL  OWNERSHIP 

AND  OPERATION 

These  difficulties  or  obstacles  are  legal,  contractual,  financial  and  ad- 
ministrative.   The  following  are  some  of  the  most  important  of  them: 

(1)  Inadequate  power  on  the  part  of  the  city  to  acquire  or  construct 
transit  lines.  At  the  present  time  the  City,  under  Section  30  of  the  Rapid 
Transit  Act,  has  the  power,  through  the  Public  Service  Commission,  act- 
ing with  the  cooperation  of  the  Board  of  Estimate  and  Apportionment, 
to  construct  and  operate  rapid  transit  lines  or  to  construct  them  and 
lease  them  to  private  parties  for  operation.  The  City  also  has  the  right, 
under  the  franchise-granting  power,  as  defined  in  Section  73  of  the 
Greater  New  York  Charter, to  grant  franchises  for  street  railways  with  the 


THE  TRANSIT  PROBLEMS  OF  NEW  YORK  CITY  13 

stipulation  that  at  the  expiration  of  the  term  of  the  grant  the  plant  and 
its  appurtenances  shall  belong  to  the  City,  either  without  money  payment 
or  upon  payment  of  its  fair  value,  as  the  franchise  may  prescribe.  Under 
this  section  of  the  charter,  the  City  has  the  unquestionable  right  to  own 
and  operate  any  street  railway  lines  which  may  come  into  its  possession 
upon  the  expiration  of  a  franchise  containing  one  or  the  other  of  the  pro- 
visions just  mentioned,  but  this  charter  was  not  written  until  long  after 
most  of  the  surface  and  elevated  street  railway  franchises  had  been 
granted  in  perpetuity.  Moreover,  most  of  the  surface  line  franchises 
granted  since  this  charter  went  into  effect  have  been  for  a  period  of  25 
years  with  the  right  on  the  part  of  the  grantee  to  a  renewal  for  a  further 
period  of  25  years  upon  a  fair  revaluation  of  the  original  grant. 
Under  the  Rapid  Transit  Act  the  subways  have  been  or  are  being 
constructed  and  have  been  leased  for  private  operation  for  a 
period  extending  to  1968  or  later.  Practically  all  the  surface  lines  are 
held  under  perpetual  franchises,  or  under  franchises  that  do  not  expire 
until  1960  or  later.  Portions  of  the  rapid  transit  lines  constructed  under 
the  dual  contracts  may  be  recaptured  by  the  City  for  public  operation 
at  any  time  after  the  expiration  of  10  years  from  the  commencement  of 
operation  by  the  companies.  But  the  City  has  no  specific  authority  at 
the  present  time  to  enter  upon  a  comprehensive  program  looking  to  the 
acquisition,  construction  and  public  operation  of  a  complete  transit 
system.  To  enable  the  City  to  proceed  to  public  ownership  and  operation 
in  an  orderly  and  effective  manner,  comprehensive  enabling  legislation  is 
needed. 

(2)  Impracticability  of  the  construction  of  independent  transit  lines. 
Where  a  City  is  in  a  position  to  choose  between  the  construction  of  a  new 
system  of  transit  lines  and  the  acquisition  of  an  existing  system,  its  posi- 
tion gives  it  great  bargaining  power.  Theoretically,  the  street  railway 
franchises  of  New  York  are  not  exclusive,  but  the  physical  limitations 
of  the  streets  are  such  that  the  City  would  nevertheless  be  debarred  from 
laying  out  and  constructing  an  independent  system  of  transit  lines  that 
would  be  in  the  slightest  degree  adequate  for  the  public  needs,  even  if  no 
consideration  were  given  to  the  question  of  injustice  to  the  existing 
companies.  It  may  be  that  under  present  conditions  the  franchises  of 
the  transit  companies  of  New  York,  if  taken  as  a  whole,  would  represent 
a  liability  rather  than  an  asset,  but  undoubtedly  many  of  the  underlying 
franchises  are  still  believed  by  their  owners  to  be  of  great  value,  and  so 
long  as  these  franchises,  for  all  practical  purposes,  are  exclusive,  it  is  not 
to  be  expected  that  their  owners  will  voluntarily  surrender  them. for  less 
than  they  think  they  are  worth. 

(3)  Impracticability  of  voluntary  agreement  with  the  companies' upon 
a  purchase  price  that  would  not  be  disadvantageous  to  the  city.  There  is 
a  great  deal  of  confusion  in  the  public  mind  with  respect  to  the  extent 


14  THE  TRANSIT  PROBLEMS  OF  NEW  YORK  CITY 

and  character  of  the  concessions  that  may  be  secured  from  street  railway- 
companies  through  negotiation.  Almost  invariably  public  utility  prop- 
erties and  rights  have  been  subjected  to  a  variety  of  liens  which  put  the 
operating  companies  themselves  in  a  position  where  they  are  not  free  to 
bargain  with  a  city.  When  bonds  have  been  issued  or  leasehold  guaran- 
ties executed  which  establish  a  liability  greater  than  the  conservative 
physical  value  of  the  property,  it  is  perfectly  futile  for  the  public  authori- 
ties to  enter  into  negotiation  with  the  nominal  owners  of  the  property, 
as  the  latter  obviously  cannot  agree  upon  a  value  which  the  City  could 
afford  to  accept.  By  doing  so,  they  would  automatically  give  up  their 
own  financial  interest  in  the  property  and  remove  themselves  from  its 
control.  Of  course,  not  all  companies  are  in  exactly  the  same  position  in 
this  matter,  and  before  determining  whether  or  not  to  enter  upon  nego- 
tiations with  the  nominal  owners  of  a  particular  property,  the  City  should 
look  into  the  obligations  existing  against  the  property  and  determine 
whether  or  not  it  would  be  possible  for  the  owners  to  enter  into  a  fair 
agreement  with  respect  to  the  value  of  the  property.  If  the  nominal 
owners  are  not  in  a  position  to  do  this,  obviously  any  negotiations  with 
them  point  either  in  the  direction  of  delay  and  futility  or  in  the  direction 
of  the  City's  making  an  improvident  agreement,  knowing  it  to  be  such. 
These  considerations  probably  make  it  impracticable  for  the  City  of 
New  York  to  acquire  all  the  existing  transit  lines  through  voluntary 
negotiation  and  agreement,  at  least  until  more  of  the  present  nominal 
owners  are  ejected  from  control  through  receivership  proceedings.  It 
may  be  that  even  then  no  voluntary  agreement  with  the  complex  and 
conflicting  private  interests  could  be  secured  by  the  city  that  would  be 
advantageous  to  it. 

(4)  Inadequacy  oi  present  condemnation  law  and  procedure.  The 
condemnation  law  under  which  the  City  of  New  York  acquires  real  estate 
for  water  purposes  is  contained  in  a  number  of  special  sections  of  the 
Greater  New  York  Charter.  It  is  hopelessly  inadequate  for  the  condemna- 
tion of  the  useful  property  of  the  private  water  companies,  and  is  not 
applicable  at  all  to  the  property  of  other  utilities.  The  general  con- 
demnation law  for  New  York  is  contained  in  another  part  of  the  charter 
and  was  designed  primarily  for  use  in  the  acquisition  of  real  estate  in 
connection  with  street  openings,  parks,  etc.  It  does  not  apply  to  public 
utilities  now,  and  even  if  the  City  were  given  authority  to  acquire  transit 
lines  under  this  law,  the  procedure  would  probably  be  quite  inadequate 
and  unsatisfactory.  Under  the  theory  of  condemnation  of  private  prop- 
erty, the  owner  is  compensated  for  the  full  market  value  of  the  property 
taken,  and  for  severance  damages  where  only  a  part  of  his  property  is 
acquired.  The  tendency  of  the  courts  and  of  condemnation  commissioners 
in  all  questions  relating  to  value,  is  to  give  the  property  owner  the  benefit 
of  any  doubt  that  may  exist.    The  result  is  that  land  acquired  by  con- 


THE  TRANSIT  PROBLEMS  OF  NEW  YORK  CITY  15 

demnation  proceedings  is  often  very  expensive,  even  where  the  proceed- 
ings are  properly  conducted.  Sometimes  the  price  paid  is  enough  to 
create  a  public  scandal.  Street  railway  franchises  are  regarded  as 
property  in  this  state,  and  it  might  cost  the  City  a  pretty  penny  to  reac- 
quire them  through  ordinary  condemnation  proceedings,  even  though,  if 
their  terms  and  conditions  were  properly  enforced,  they  might  be  a 
liability  rather  than  asset  for  their  private  owners.  Moreover,  under  the 
general  condemnation  law,  no  provision  is  possible  for  the  appointment 
of  commissioners  or  arbitrators  who  are  really  competent  to  pass  upon 
the  intricate  questions  of  value  involved  in  the  acquisition  of  a  public 
utility.  Without  legislation  properly  circumscribing  the  procedure,  all 
doubts  as  to  true  value  would  probably  be  resolved  in  favor  of  the  street 
railway  companies,  the  same  as  if  the  property  taken  were  strictly  private 
property  devoted  to  private  purposes  and  free  to  be  disposed  of  for  its 
highest  economic  use.  Thus,  the  City  would  not  benefit  from  the  fact 
that  the  property  is  already  devoted  to  the  public  service  and  is  subject 
to  the  burdens  and  obligations  inherent  in  its  use  for  transit  purposes. 
Again,  if  the  rates  in  force  under  franchise  contracts  were  for  the  moment 
more  than  sufficient  to  yield  a  fair  return  upon  the  investment,  they 
would  nevertheless  be  assumed  to  be  reasonable  for  the  purposes  of  the 
condemnation  proceeding  and  the  extra  earning  power  actually  enjoyed 
by  the  company  would  go  to  swell  the  value  of  the  property.  On  the 
other  hand,  if  the  company  were  bound  under  its  franchise  to  render 
service  at  a  rate  that  was  insufficient  to  yield  a  fair  return  upon  the  in- 
vestment, it  is  quite  certain  that  this  liability  would  not  be  deducted,  in 
ordinary  condemnation  procedure,  from  the  value,  so-called,  of  the 
physical  property. 

Under  present  laws,  even  if  they  were  made  applicable  to  the  acquisi- 
tion of  transit  properties,  the  City  would  face  the  probable  necessity  of 
paying  for  these  properties  a  price  so  extravagant  as  to  start  municipal 
ownership  off  with  a  heavy  handicap  of  fixed  charges,  which  might  in 
some  cases  even  approximate  the  burdens  of  overcapitalization  under 
which  the  private  companies  groan  and  go  bankrupt.  Any  legislation 
designed  to  establish  rules  of  valuation  in  condemnation  proceedings 
would  require  extremely  careful  preparation,  both  because  of  the  in- 
tricacy of  the  problem  itself  and  also  because  of  the  jealousy  of  the 
courts  as  the  acknowledged  guardians  of  property  rights. 

(5)  Constitutional  limitation  upon  the  city's  debt-incurring  power. 
Under  the  present  constitution  of  the  State  of  New  York  the  debt-incur- 
ring power  of  cities  is  limited  to  10  per  cent,  of  the  assessed  valuation  of 
real  estate  for  taxing  purposes,  with  the  exception  that  bonds  issued  for 
the  acquisition  or  construction  of  waterworks  are  exempt  from  the  debt 
limit,  and  with  the  further  exception  that  in  New  York  City  bonds  issued 
for  a  public  improvement  yielding  a  net  revenue  in  excess  of  the  interest 


16  THE  TRANSIT  PROBLEMS  OF  NEW  YORK  CITY 

and  amortization  charges  upon  such  bonds  may  be  subsequently  ex- 
cluded from  the  debt  limit.  It  should  be  observed  that  bonds  issued  for 
transit  purposes  might  be  brought  under  the  New  York  City  exception, 
if  the  transit  lines  were  self-sustaining.  In  the  first  instance,  however, 
these  bonds  could  be  issued  only  within  the  debt  limit,  even  though  later 
on  they  might  be  excluded,  thus  releasing  additional  credit  for  use  in  the 
acquisition  of  other  public  utilities. 

For  many  years  the  City  has  been  hugging  its  debt  limit  so  close  that 
there  has  been  a  doubt  at  any  given  time  as  to  whether  or  not  it  had  as- 
sumed obligations  in  violation  of  the  constitution.  For  the  purpose  of  in- 
creasing the  City's  debt-incurring  power  the  assessments  of  real  estate  a 
few  years  ago  were  jacked  up  several  hundred  million  dollars,  but 
no  one  contends  that  it  would  be  practicable  to  repeat  this  process  on  a 
large  scale  for  the  purpose  of  purchasing  the  transit  lines.  Several 
months  ago  the  comptroller  stated  that  the  City  did  not  have  a  sufficient 
margin  of  credit  within  the  debt  limit  to  provide  the  funds  requisite  for  the 
completion  of  the  rapid  transit  lines  to  which  the  City  is  bound  by  the 
terms  of  the  dual  subway  contracts.  If  the  City's  financial  condition  has 
since  improved,  the  credit  margin  now  available  is  certainly  a  mere  baga- 
telle compared  with  what  would  be  needed  for  the  purchase  of  the  transit 
properties.  The  acquisition  of  all  the  transit  lines  in  New  York  would 
probably  involve  the  payment  of  at  'least  six  or  eight  hundred  million 
dollars  as  the  price  of  the  portion  of  the  property  owned  by  private 
companies.  It  is  perfectly  clear  that  the  City  cannot  make  any  satisfac- 
tory headway,  either  now  or  at  any  time  in  the  near  future,  in  the 
acquisition  of  the  transit  lines  through  the  use  of  municipal  credit  under 
the  debt  limit  as  it  stands  to-day.  If  every  other  municipal  need  could 
be  subordinated  to  the  acquisition  of  the  street  railways,  and  if  a  period 
of  continued  prosperity  should  warrant  a  radical  increase  in  the  assess- 
ments, it  might  be  possible  to  acquire  the  transit  systems  piece-meal, 
and,  after  each  new  acquisition  had  proved  to  be  self-sustaining,  to  secure 
the  removal  from  the  debt  limit  of  the  bonds  issued  for  its  purchase;  but 
on  account  of  the  recent  immense  increase  in  the  cost  of  operating  transit 
lines,  it  is  unlikely  that  systems  acquired  piece-meal  would  prove  self- 
sustaining  at  a  5-cent  fare.  For  reasons  already  stated,  an  increase  in 
fare  would  almost  certainly  not  be  attended  by  a  corresponding  increase 
in  revenues  and  it  is  within  the  realm  of  possibility  that  some  portions  of 
the  transit  system,  if  operated  independently,  could  not  be  made  self- 
sustaining  at  the  present  time,  no  matter  what  fare  was  charged.  Also, 
the  City  could  not  increase  the  fares  upon  its  own  fragmentary  lines 
without  financial  disaster,  unless  at  the  same  time  it  permitted  or  required 
the  companies  to  increase  the  fares  to  the  same  extent  on  lines  temporarily 
remaining  in  their  hands  and  being  operated  in  competition  with  the  City 
lines.    For  the  purchase  of  a  public  utility,  it  might  be  possible,  without 


THE  TRANSIT  PROBLEMS  OF  NEW  YORK  CITY  17 

violating  the  debt  limitations  imposed  by  the  constitution,  to  issue  bonds 
that  are  not  secured  upon  the  general  credit  of  the  City,  but  solely  upon 
the  property  of  the  utility  purchased,  with  the  right  to  foreclosure  and  to  a 
return  to  private  ownership  and  operation  in  case  of  default  by  the  city 
in  the  payment  of  interest  or  principal,  but  such  a  procedure  would  for- 
feit to  the  city  one  of  the  principal  advantages  of  public  ownership, 
namely,  the  low  interest  rate  on  capital  secured  on  the  basis  of  municipal 
credit.  Also,  it  might  be  possible  to  issue  outside  of  the  debt  limit,  bonds 
secured  by  a  first  lien  upon  the  gross  or  net  earnings  of  the  utility.  Still 
no  legislation  providing  for  the  adoption  of  either  of  these  financial  ex- 
pedients has  as  yet  been  placed  on  the  statute  books  of  this  state,  and 
its  constitutionality  will  not  be  fully  established  until  it  has  been  enacted 
and  has  stood  the  test  of  litigation. 

(6)  Practical  financial  difficulty  involved  in  paying  for  existing 
transit  lines.  Aside  from  any  legal  limitations  upon  the  City's  debt 
incurring  power,  the  transformation  of  three-quarters  of  a  billion  dollars 
of  private  securities  into  public  securities  might  be  attended  with  grave 
difficulties,  especially  during  the  period  immediately  following  the  close 
of  the  most  destructive  war  that  the  world  has  ever  witnessed.  Unless 
the  great  financial  houses,  which  during  the  past  have  had  a  controlling 
interest  in  the  flotation  of  city  bonds,  were  in  sympathy  with  the  City's 
municipal  ownership  policy,  great  difficulties  might  be  encountered  in 
selling  six  or  eight  hundred  million  dollars  of  city  securities  at  a  satisfac- 
tory price.  At  the  present  time  there  is  no  provision  of  law  under  which 
the  City  could  acquire  the  transit  lines  either  by  purchase  or  by  con- 
demnation, taking  them  subject  to  the  bonds  already  outstanding  against 
them.  Indeed,  in  some  cases,  it  may  be  that  the  amount  of  the  bonds  now 
outstanding  is  greater  than  the  true  value  of  the  property.  At  any  rate, 
a  plan  that  would  involve  the  sale  of  new  securities  to  enable  the  City 
to  pay  the  full  purchase  price  of  the  transit  properties  in  cash,  which 
would  be  used  in  satisfying  obligations  now  outstanding  against  the 
companies,  might  threaten  to  create  so  profound  a  disturbance  in  the 
investment  world  as  to  be  considered  impracticable  at  a  period  when 
financial  stability  is  regarded  as  especially  important. 

(7)  Inadequate  power  on  the  part  of  the  city  to  undertake  the  opera- 
tion of  transit  lines.  Formerly,  many  advocates  of  municipal  ownership 
were  opposed  to  municipal  operation.  Their  plan  was  to  have  the 
capital  required  for  the  construction  and  equipment  of  transit  lines 
furnished  by  the  City,  but  to  have  the  actual  operation  of  the  lines 
carried  on  by  a  private  company  under  lease.  The  exigencies  of  the 
war  have  brought  about  certain  experiments  with  a  policy  nearly  the 
reverse  of  this.  The  United  States  Government  at  the  present  time  is 
operating  the  railroads  under  a  plan  which  provides  for  the  payment 


18  THE  TRANSIT  PROBLEMS  OF  NEW  YORK  CITY 

of  a  rental  to  the  companies  owning  these  properties  and  does  not  make 
any  provision  for  the  ultimate  acquisition  of  title  to  the  properties  or  for 
the  retirement  of  the  private  investments  in  them.  The  state  of  Massa- 
chusetts only  last  year  adapted  this  plan  to  the  cases  of  the  Boston 
Elevated  Railway  Company  and  the  Bay  State  Street  Railway  Company 
(since  reorganized  as  the  Eastern  Massachusetts  Street  Railway  Com- 
pany), which  are  now  being  operated  by  boards  of  public  trustees,  al- 
though private  ownership  is  continued.  By  these  experiments  this  plan 
has  at  least  been  raised  to  the  dignity  of  a  debatable  policy.  Indeed,  it  is 
conceivable  that  if  the  disadvantages  of  private  ownership  and  operation 
attach  primarily  to  the  operation  end,  the  major  benefits  of  public 
ownership  and  operation  might  be  secured  through  the  adoption  of  this 
plan  of  public  operation  with  private  ownership.  The  Boston  experi- 
ment has  thus  far  proven  very  unpopular,  but  so  far  as  can  be  learned 
its  unpopularity  has  little  or  nothing  to  do  with  the  merits  of  public 
operation,  with  or  without  public  ownership,  as  compared  with  the 
merits  of  private  ownership  and  operation.  If  some  adaptation  of  the 
Boston  plan  were  feasible  in  New  York,  this  would  undoubtedly  provide 
the  quickest  means  for  the  elimination  of  the  evils  of  private  operation 
and  would  not  involve  any  disturbance  in  the  investment  world.  Indeed, 
one  of  the  primary  reasons  for  the  adoption  of  the  plan  in  Boston  was  the 
desire  to  stabilize  and  guarantee  a  fair  return  upon  the  investments 
which,  under  private  ownership  and  operation,  had  for  some  time  been 
seriously  endangered.  However  advantageous  the  plan  might  be  for 
New  York,  the  City  could  not  adopt  it  without  additional  legislative 
and  constitutional  authority. 

(8)  Dangers  of  political  interference.  One  of  the  strongest  objec- 
tions to  municipal  ownership  in  the  minds  of  many  has  been  the  fear  that 
it  would  be  impossible  to  keep  the  administration  of  municipally-owned 
utilities  "out  of  politics,"  with  the  result  that  extravagance  and  ineffi- 
ciency would  ensue.  In  New  York,  where  administrative  demoralization 
in  the  operation  of  the  rapid  transit  lines  might  result  in  public  disaster, 
there  is  a  tendency  especially  to  emphasize  this  danger.  The  argument 
against  municipal  operation  is  greatly  strengthened  where  public  officials 
elected  on  a  municipal  ownership  platform  take  the  position  that  experts 
are  not  needed  in  city  government,  but  that  any  average  citizen  with 
a  normal  endowment  of  common  sense  is  entirely  competent,  regardless 
of  his  experience  or  his  lack  of  it,  to  administer  public  affairs.  Obviously, 
great  public  utilities  such  as  the  transit  lines  of  New  York  cannot  be 
successfully  operated  by  novices,  or  by  persons  whose  only  qualification 
for  the  job  is  their  experience  as  precinct  captains  or  district  leaders. 
The  fact  is  that  most  American  cities  in  their  general  administration 
have  suffered  grievously  by  the  intrusion  of  state  and  national  politics. 
The  movement  for  non-partisan  city  government,  or  at  least  for  the 


THE  TRANSIT  PROBLEMS  OF  NEW  YORK  CITY  19 

exclusion  of  partisanship  from  certain  vital  branches  of  the  city  gov- 
ernment, has  made  great  headway  in  the  United  States  during  the  last 
two  or  three  decades;  and  when  we  consider  the  importance  of  certain 
functions  which  the  cities,  for  better  or  for  worse,  have  undertaken  to 
perform,  we  see  not  so  much  the  difficulty  of  excluding  partisan  politics 
from  the  administration  of  these  functions,  but  rather  the  absolute 
necessity  of  doing  so,  no  matter  what  the  difficulties  are.  Certainly,  the 
appointment  of  political  hangers-on  to  lucrative  jobs  in  connection  with 
the  operation  of  a  municipal  utility  is  an  evil  to  be  feared  and  avoided. 
So  also  is  rotation  in  management  that  is  entirely  dependent  upon  the 
success  or  defeat  of  particular  parties  or  factions.  But  it  is  equally 
necessary  to  exclude  these  evil  practices  from  the  administration  of  the 
schools,  the  fire  department,  the  police  department  and  public  charities, 
to  name  no  others  of  the  principal  functions  of  municipal  government. 
Moreover,  any  system  of  handling  the  public  utilities  that  tends  to  intro- 
duce corruption  or  weakness  in  municipal  government,  on  account  of  the 
special  interests  and  claims  of  private  corporations  having  franchises 
in  the  streets,  has  the  double  tendency,  not  only  to  demoralize  the 
other  functions  of  municipal  administration  but  also  to  bring  politics 
into  the  administration  of  the  utilities  themselves,  even  under  private 
ownership.  Political  interference,  and  inefficiency  as  a  result  of  it,  have 
by  no  means  been  unknowri  in  the  history  of  the  street  railway  business 
of  New  York.  Nevertheless,  this  danger  to  municipal  ownership  and 
operation  is  a  real  one,  and  any  plan  for  the  launching  of  a  municipal 
ownership  program  must  include  careful  safeguards  against  it. 

(9)  Civil  service  handicaps.  The  merit  system,  which  became  man- 
datory in  New  York  upon  the  adoption  of  the  state  constitution  of 
1894,  was  devised  for  a  double  purpose:  first,  to  prevent  appointments 
to  and  removals  from  subordinate  positions  in  the  municipal  service 
being  made  for  political  or  religious  reasons;  and,  second,  to  make  the 
public  service  honorable,  efficient  and  democratic  by  opening  to  any 
citizen,  regardless  of  his  antecedents,  an  opportunity  for  a  career  in 
the  civil  service,  dependent  only  upon  his  merit  and  fitness.  Any 
plan  is  more  likely  to  succeed  in  the  hands  of  its  friends  than  in  the 
hands  of  its  enemies.  The  merit  system  has  been  compelled  to  make 
its  way  in  large  measure  as  a  restriction  upon  the  discretion  of  those 
who  are  called  upon  to  operate  it.  The  success  of  the  merit  system, 
when  administered  by  people  who  do  not  believe  in  it  and  who  take 
every  opportunity  to  disregard  it  or  to  thwart  it,  is  about  as  great  as 
the  success  that  can  be  expected  of  municipal  ownership  and  operation 
under  public  officials  who  consider  that  private  ownership  and  operation 
is  the  only  proper  policy  and  that  they  and  their  colleagues  in  the 
public  service  are  and  always  will  be  unable  to  do  the  job  efficiently. 


20  THE  TRANSIT  PROBLEMS  OF  NEW  YORK  CITY 

As  a  result,  civil  service  laws  and  regulations  have  become  very  cumber- 
some and  complicated  and  the  public  employes  holding  positions  in  the 
classified  service  have  not  as  a  rule  developed  the  alertness  and  ambition 
that  ought  to  characterize  an  official  career.  In  many  cases  the  effort 
to  protect  employes  from  removal  for  political  reasons  has  resulted 
in  giving  them  so  much  security  of  tenure  that  they  have  little  or 
no  motive  to  fear  losing  their  jobs  on  account  of  laziness  or  inefficiency, 
while  at  the  same  time  the  rules  adopted  to  prevent  political  favoritism 
in  promotions  are  so  inflexible  as  to  deaden  the  hope  of  securing  proper 
advancement  for  real  merit.  When  high-grade  men  find  themselves 
temporarily  in  charge  of  municipal  departments,  they  are  often  handi- 
capped in  their  efforts  to  bring  about  changes  in  the  organization  and 
personnel  of  their  departments,  without  which  they  cannot  administer 
them  effectively.  It  may  be  that  the  civil  service  laws  and  regulations, 
built  up  by  the  reformers  for  the  purpose  of  improving  the  personnel 
of  the  public  departments,  would  prove  to  be  a  serious  menace  to  the 
efficient  operation  of  municipal  utilities,  unless  modified  so  as  to  provide 
a  more  flexible  method  of  promoting  competent  employes  and  discharg- 
ing those  that  are  incompetent.  It  is  often  said  that  people  cannot  be 
made  moral  by  statute.  It  certainly  is  a  discouraging  job  to  try  by 
statute  to  make  public  servants  efficient  when  they  desire  to  be  the 
very  opposite.  The  fact  is  that  neither  municipal  operation  nor  any 
other  public  function  will  ever  be  carried  on  efficiently  unless  public 
opinion  strongly  favors  efficiency  and  makes  itself  felt  in  the  selection 
of  the  responsible  public  officials. 

(10)  Danger  of  employes  combining  for  political  or  personal  ends. 
The  City  of  New  York  already  has  about  85,000  people  on  its  regular 
payrolls.  The  transit  lines  of  New  York  have  approximately  40,000 
regular  employes.  If  all  these  employes  were  taken  over  into  the 
public  service  they  would  constitute  a  more  or  less  compact  block, 
with  considerable  political  possibilities.  It  is  conceivable  that  in  a 
close  election,  where  issues  in  which  the  municipal  traction  employes 
had  a  special  interest  were  involved,  even  in  a  minor  way,  this  block 
of  votes  might  hold  the  balance  of  power,  and  be  cast  in  such  a  way 
as  to  determine  the  policies  of  the  city  not  merely  with  respect  to  street 
railway  matters,  but  with  respect  to  other  matters  of  grave  importance. 
This  danger,  if  it  be  a  danger,  exists  today;  it  would  only  be  increased 
by  the  addition  of  another  large  block  of  employes  to  the  public  pay- 
rolls. It  is  well  known  that  certain  groups  of  public  employes  are  now 
banded  together  for  the  purpose  of  influencing  elections  and  legislation 
for  the  advancement  of  their  particular  interests.  Organizations  of 
firemen,  policemen  and  school  teachers  are  well  known  in  the  legislative 
halls  at  the  state  capitol,  and  candidates  for  congress  do  not  always 


THE  TRANSIT  PROBLEMS  OF  NEW  YORK  CITY  21 

ignore  the  existence  of  the  letter-carrier  vote.  It  is  likely  that  the 
recent  doubling  of  the  electorate  in  New  York,  through  the  extension  of 
the  suffrage  to  women,  will  tend  to  neutralize  the  power  of  any  particular 
group  of  voters  so  that  New  York  might  be  able  in  the  future  safely 
to  absorb  into  the  body  of  the  electorate  twice  as  many  municipal 
employes  as  it  has  had  to  absorb  in  the  past.  Municipal  employes  are 
also  citizens  and  it  is  not  at  all  likely  that  their  other  political  and 
civic  interests  would  be  completely  subordinated  to  the  demand  for 
organized  political  action  to  preserve  or  better  their  city  jobs.  Still, 
the  burden  rests  upon  the  proponents  of  municipal  operation  to  include 
in  their  program  all  practicable  measures  to  avoid  the  danger  of  the 
development  of  undue  political  power  in  the  hands  of  organized  bodies 
of  public  employes  having  for  their  chief  interest  the  grinding  of  their 
own  axes. 

(11)  Danger  that  public  operation  of  public  utilities  will  become 
unduly  burdensome  upon  the  taxpayers.  Under  public  ownership  and 
operation  of  transit  lines  the  expenses  of  rendering  the  service  and  the 
interest  and  sinking  fund  charges  on  the  bonds  outstanding  would  have 
to  be  paid.  The  people  who  ride  on  the  cars  like  low  fares  and  good 
service,  and  these  people  undoubtedly  constitute  an  overwhelming  ma- 
jority of  the  voting  population.  If  the  fear  that  municipal  operation 
would  be  extravagant  proved  to  be  well  founded,  the  necessary  choice 
would  be  between  higher  rates  and  subsidies  out  of  taxes.  If,  on  the 
other  hand,  the  patrons  of  the  transit  lines  should  insist  upon  lower 
fares,  a  double  burden  might  thereby  be  thrown  upon  the  direct  tax- 
payers, namely,  the  burden  of  inefficiency  and  the  burden  of  service 
at  less  than  cost.  Undoubtedly,  if  bonds  are  issued  within  the  debt 
limit  for  the  purchase  of  the  transit  lines,  the  taxpayers  will  have  to  be 
ultimately  responsible  for  interest  and  amortization  charges  on  the  capital 
invested  in  the  municipal  utility  plants.  A  public  hardship  might  result 
from  the  expansion  of  the  City's  funded  debt,  if  that  necessitated  an 
undue  curtailment  in  the  expenditures  for  other  improvements  vital  to 
the  welfare  of  the  City.  Also  an  undue  increase  in  the  tax  rate  might 
have  the  effect  of  compelling  retrenchment  in  other  branches  of  the 
City  government,  or  in  placing  too  heavy  a  burden  upon  the  direct 
taxpayers.  It  would  seem  that  under  normal  conditions  in  an  ordinary 
city  the  municipal  transit  lines  ought  to  be  made  self-sustaining.  In 
New  York,  however,  conditions  are  peculiar.  The  great  area  of  the 
city  and  its  immense  population,  with  the  long-continued  congestion  in 
the  tenement  districts  of  Manhattan  and  portions  of  The  Bronx  and 
lower  Brooklyn,  have  induced  the  City  to  adopt  the  policy  of  giving 
support  out  of  taxation  for  the  maintenance  and  extension  of  a  system 
of  uniform  low  fares.     While  the  possibility  that  municipal  ownership 


22  THE  TRANSIT  PROBLEMS  OF  NEW  YORK  CITY 

and  operation  might  place  too  heavy  a  burden  upon  the  taxpayers  must 
be  given  consideration,  yet  it  is  clear  that  so  far  as  New  York  is 
concerned  the  die  is  cast,  and  unless  the  City  should  reverse  its  policy 
and  take  what  many  would  regard  as  a  fatal  step  backward,  it  must 
be  prepared  to  guarantee  the  cost  of  adequate  transit  service  at  low 
rates  by  special  forms  of  taxation  or  by  subsidies  from  the  public  treasury 
to  whatever  extent  may  prove  to  be  necessary,  whether  under  public  or 
under  private  ownership. 

(12)  Danger  of  over-extension  of  lines.  A  great  many  street  rail- 
ways in  different  cities  of  the  country  have  been  over-built,  either  be- 
cause men  in  control  of  the  companies  had  private  landed  interests  in  out- 
lying sections,  or  because  other  persons  interested  in  the  development 
of  suburban  real  estate  were  able  to  bring  sufficient  pressure  to  secure 
the  extension  of  car  lines  in  advance  of  any  legitimate  public  need.  It 
is  feared  by  some  that  with  the  power  to  order  extensions  vested  in  the 
Board  of  Estimate  and  Apportionment,  the  Board  of  Aldermen,  or  some 
other  political  body,  the  clamor  for  street  railway  extensions  from  differ- 
ent outlying  sections  would  prove  to  be  irresistible,  and  that  as  a  result 
municipal  ownership  and  operation  would  founder  on  the  rock  of  pre- 
mature extension  and  over-development.  This  would  mean  not  only 
an  unnecessary  increase  in  the  capital  investment  and  the  fixed  charges 
resulting  therefrom,  but  also  in  excessive  operating  costs  on  account  of 
the  necessity  of  maintaining  and  rendering  service  on  non-paying  lines. 
This  involves  a  grave  question  of  public  policy,  but  the  fact  should  not 
be  overlooked  that  in  Great  Britain  where  most  of  the  large  cities  have 
municipalized  the  tramways,  this  danger  of  overbuilding  has  not 
amounted  to  anything.  In  fact,  if  we  were  to  heed  the  criticisms 
made  by  men  interested  in  continued  private  control  in  this  country, 
we  should  have  to  conclude  that  British  municipalities  have  been  over- 
conservative  about  extensions. 

As  already  indicated,  the  conclusion  that  uninterrupted  urban  transit 
is  a  vital  necessity  and  that  under  prevailing  conditions  it  is  imprac- 
ticable to  expect  adequate  success  through  a  continuation  of  the  policy 
of  private  ownership  and  operation,  points  directly  to  public  ownership 
and  operation  as  unavoidable.  Under  these  conditions,  the  difficulties  in 
the  way  of  public  ownership  and  operation  are  to  be  analyzed  and 
stated,  not  for  the  purpose  of  discouraging  or  preventing  the  adoption 
of  this  policy,  but  rather  as  the  first  step  in  devising  means  to  put  it 
into  effect.  The  definite  formulation  of  the  measures  necessary  to  make 
public  ownership  and  operation  of  transit  lines  in  New  York  legally, 
financially  and  politically  feasible  is  not  an  overnight  job. 


THE  TRANSIT  PROBLEMS  OF  NEW  YORK  CITY  23 

NECESSARY  MEASURES  PREPARATORY  FOR  MUNICIPAL  OWNERSHIP  AND 

OPERATION  IN  NEW  YORK 

Taking  up  in  order  the  several  obstacles  in  the  way  of  successful  public 
ownership  and  operation  in  New  York,  as  outlined  in  the  preceding 
division  of  this  statement,  we  suggest  the  following  means  of  overcoming 
them : 

(1)  The  absence  of  legal  authority  to  acquire  and  own  the  transit 
lines  can  be  cured  by  legislation.  At  least  three  general  municipal  owner- 
ship bills  were  introduced  in  the  legislature  at  the  1919  session.  Of 
these  the  most  important  was  the  Fowler  bill  originally  drafted  by  a 
committee  of  experts  for  the  organization  of  mayors  and  other  officials 
of  the  cities  of  New  York  State,  and  subsequently  revised  by  a  com- 
mittee of  the  City  Club.  This  bill  would  have  conferred  upon  the 
city  legal  authority  to  undertake  municipal  ownership  of  any  public 
utility  for  the  operation  of  which  a  franchise  is  required,  and  to  acquire 
the  property  of  existing  utilities  by  purchase  or  condemnation.  If 
enacted,  it  would  have  marked  a  most  important  step  in  the  history  of 
legislation  in  New  York,  and  would  have  definitely  recognized  municipal 
ownership  and  operation  as  a  policy  to  which  the  state  no  longer  had 
objections.  This  bill  passed  the  Senate  but  was  defeated  in  the  Assembly. 
The  enactment  of  permissive  legislation  granting  to  cities  the  bare  legal 
authority  to  acquire  and  own  public  utilities  is  a  relatively  simple 
problem.  The  real  difficulty  comes  in  the  drafting  of  legislation  pre- 
scribing the  methods  of  acquisition,  the  ways  of  paying  for  the  property, 
and  the  manner  of  operating  it. 

(2)  The  impracticability  of  building  a  complete  independent  com- 
peting municipal  transit  system,  or  of  effectively  threatening  to  do  so, 
cannot,  under  the  circumstances,  be  overcome.  It  would  be  possible, 
however,  for  the  City  to  acquire  a  fragment  of  the  existing  transit  lines, 
as,  for  example,  the  Third  Avenue  Railway  System,  or,  when  the  re- 
capture clause  of  the  subway  contracts  comes  into  effect,  one  of  the 
rapid  transit  units  therein  described,  and  on  the  basis  of  this  fragment 
enter  into  competition  with  the  other  lines,  afterwards  gradually  extend- 
ing the  fragment  as  far  as  practicable,  so  as  to  make  it  a  formidable 
competitor.  This  is  the  policy  which  has  been  adopted  by  the  City  of 
San  Francisco.  Moreover,  the  city  might  be  able  to  strengthen  its 
position  through  the  development  of  municipal  bus  lines,  commencing 
with  the  acquisition  of  the  Fifth  Avenue  Coach  system  and  extending 
the  lines  as  far  as  practicable  to  get  the  cream  of  the  traffic  away  from 
the  privately  owned  street  car  lines.  Such  a  plan  would  entail  a  con- 
siderable waste  of  capital,  but  not  by  any  means  so  great  a  waste  as 
would  be  involved  in  the  duplication  of  the  surface  or  rapid  transit 
car  lines. 


24  THE  TRANSIT  PROBLEMS  OF  NEW  YORK  CITY 

(-3)  The  impracticability  of  reaching  a  voluntary  agreement  with 
the  companies  which  would  enable  the  City  to  purchase  the  transit 
lines  at  a  reasonable  price  can  be  overcome,  if  at  all,  only  by  the  threat 
of  competition  or  by  the  refusal  of  the  local  and  state  authorities  to 
grant  any  concessions  to  the  companies  unless  they  agree  to  a  fair  pur- 
chase price.  They  are  asking  relief  from  the  present  burdens  of  taxation 
and  franchise  charges,  and  are  seeking  permission  to  increase  their  rates. 
They  should  not  be  given  the  relief  requested  or  be  permitted  to  continue 
to  operate  where  their  franchises  have  been  forfeited  or  become  for- 
feitable, except  on  condition  that  they  surrender  their  existing  rights 
and  claims,  so  far  as  they  are  inconsistent  with  good  public  policy, 
and  agree  to  a  re-settlement  of  their  relations  with  the  City,  based  upon 
the  right  of  the  City  to  buy  them  out  at  a  fair  price  fixed  in  the  agree- 
ment or  at  a  price  to  be  fixed  in  a  fair  way  as  outlined  in  the  agreement. 

(4)  The  inadequacy  of  the  present  condemnation  law  and  procedure 
can  probably  be  overcome  by  the  formulation  and  adoption  of  legislation 
specially  adapted  to  the  condemnation  of  public  utility  properties.  While 
it  is  not  clear  how  far  the  legislature  could  go  in  laying  down  the  rules 
of  valuation,  a  law  could  be  so  framed  as  to  require  consideration  of 
certain  fundamental  facts  in  the  valuation,  in  condemnation  proceedings, 
of  property  already  devoted  to  public  service  and  subject  to  the  burdens 
and  disabilities  under  which  public  utility  property  is  operated.  This 
would  at  least  cause  the  condemnation  commissioners  and  the  courts 
to  pause  before  making  exorbitant  awards,  such  as  have  been  more  or 
less  characteristic  of  condemnation  proceedings  in  the  past  where  strictly 
private  property  has  been  taken  for  public  use,  and  would  put  the 
cities  upon  their  guard  by  calling  the  attention  of  their  legal  representa- 
tives to  lines  of  proof  and  argument  which  have  heretofore  been  much 
neglected  and  which  might  be  made  very  effective,  even  under  existing 
condemnation  rules.  The  right  to  acquire  the  transit  lines  by  condemna- 
tion was  one  of  the  features  of  the  Fowler  municipal  ownership  bill. 

(5)  The  constitutional  limitation  upon  the  City's  debt-incurring  power 
can  be  removed  by  an  amendment  to  the  constitution,  either  raising  the 
debt  limit  for  all  purposes,  or  raising  it  for  the  purpose  of  permitting  the 
issuance  of  bonds  for  the  acquisition  or  construction  of  municipal  utili- 
ties, or  entirely  excluding  utility  bonds  from  the  debt  limit.  It  is  prob- 
ably within  the  power  of  the  legislature  under  the  present  constitution 
to  make  provision  for  the  issuance  of  public  utility  bonds  secured  solely 
by  a  mortgage  upon  the  utility  property  with  the  contingent  right  to 
operate  it  under  a  franchise  in  case  of  default.  At  any  rate  such 
legislation  could  be  specifically  authorized  by  a  constitutional  amend- 
ment.   Provisions  of  this  kind  have  been  inserted  in  the  constitutions 


THE  TRANSIT  PROBLEMS  OF  NEW  YORK  CITY    25 

of  Michigan  and  Ohio  in  recent  years.  Furthermore,  the  plan  in  use 
in  the  state  of  Washington  by  which  public  utility  bonds  not  included 
within  the  debt  limit  of  the  cities  may  be  issued  upon  the  security  of  a 
special  fund  created  from  the  gross  earnings  of  a  municipal  utility,  might 
be  adopted  in  New  York  by  legislative  act.  Under  this  plan  the  City 
of  Seattle  took  over  on  March  31,  1919,  the  entire  local  street  railway 
system  of  the  Puget  Sound  Traction,  Light  and  Power  Company.  The 
purchase  price  of  $15,000,000  was  paid  in  these  utility  bonds  bearing 
interest  at  five  per  cent.  The  plan  was  sanctioned  by  the  highest  court 
of  the  State  of  Washington  in  a  decision  handed  down  March  5th,  1919. 
The  Washington  statute  contemplates  that  rates  shall  be  maintained  at 
a  point  where  the  utility  will  be  fully  self-sustaining,  but  the  Seattle 
ordinances  upheld  by  the  court  give  the  street  railway  bonds  a  first  lien 
upon  gross  earnings,  leaving  any  deficits  in  operating  expenses  to  be 
made  good  out  of  the  city's  general  fund. 

(6)  The  practical  financial  difficulty  involved  in  the  city's  paying  for 
the  existing  transit  lines  in  case  of  the  opposition  of  the  great  financial 
houses  could  perhaps  be  overcome  by  legislation  under  which  the  city 
could  take  over  the  equities  in  the  properties  subject  to  the  underlying 
bonds  now  outstanding.  Indeed,  it  is  probable  that  as  soon  as  the  country 
has  recovered  a  little  from  the  extraordinary  financial  strain  of  the  war, 
the  city  would  be  able  to  find  a  market  for  its  securities,  if  legal  diffi- 
culties were  out  of  the  way,  by  selling  them  over  the  counter.  Certainly 
the  transit  companies  are  unpopular  enough  in  New  York,  and  the  pros- 
pect of  municipal  ownership  and  operation,  if  a  wise  plan  for  its  inaugura- 
tion were  adopted,  would  be  attractive  enough  to  the  general  public  to 
make  the  failure  of  a  popular  loan  for  the  acquisition  of  the  transit  lines 
most  unlikely. 

(7)  The  inadequacy  of  the  City's  power  to  operate  transit  lines  can 
readily  be  overcome  by  legislation.  The  Fowler  municipal  ownership 
bill  would  have  put  municipally  operated  utilities  under  the  control  of  the 
public  service  commissions  with  respect  to  accounting,  reports,  safety  of 
operation  and  non-discrimination  in  rates.  With  respect  to  most  other 
matters  the  jurisdiction  of  the  commissions  should  be  merely  cooperative 
and  advisory.  Certainly,  as  applied  to  New  York  transit  lines,  the 
Public  Service  Commission  could  not  properly  be  given  authority  to 
determine  matters  of  municipal  policy  as  between  the  car  riders  and  the 
taxpayers.  Where  a  municipality  in  operating  a  utility  renders  service 
outside  of  its  corporate  limits,  the  terms  and  conditions  of  such  service 
may  properly  be  controlled  by  a  state  commission,  where  not  fixed  by 
contracts  between  the  municipalities  concerned,  with  the  commission's 
approval.    But  this  problem,  if  it  should  arise  at  all  in  connection  with 


26  THE  TRANSIT  PROBLEMS  OF  NEW  YORK  CITY 

municipal  transit  operation  by  the  City  of  New  York,  would  be   of 
minor  importance,  at  least  for  a  long  time  to  come. 

(8),  (9)  and  (10)  The  dangers  of  political  interference,  the  handicaps 
of  civil  service  regulation  and  the  danger  that  municipal  transit  employes 
would  do  harm  by  combining  for  political  or  personal  ends,  can  be  over- 
come or  minimized  by  wise  legislation,  and  can  be  effectively  overcome 
by  public  opinion  and  efficient  administration.  The  city  should  under- 
take the  municipalization  of  the  transit  system  in  a  broad  constructive 
spirit,  appealing  to  its  citizens  for  cooperation  in  the  furtherance  of  the 
public  welfare,  and  in  the  development  of  a  strong  and  efficient  municipal 
democracy  in  accordance  with  the  awakened  spirit  of  liberty  and  re- 
sponsibility incident  to  the  part  America  has  played  in  the  World  War. 
The  fact  should  not  be  overlooked  that  the  effects  of  efficiency  or  in- 
efficiency in  the  operation  of  local  transit  lines  is  more  obvious  to  every 
citizen  than  in  the  case  of  any  other  public  function,  and  under  munic- 
ipal operation  this  would  be  a  powerful  deterrent  to  inefficiency.  A  plan 
should  be  worked  out  that  would  guarantee  to  the  employes  an  effective 
participation  in  the  adjustment  of  their  grievances.  The  principles  of 
organization,  collective  bargaining,  impartial  investigation  of  complaints 
and  full  publicity  should  be  woven  into  the  plan.  The  rights  of  the 
employes  to  just  compensation  and  reasonable  hours  and  conditions  of 
work  should  be  amply  guaranteed,  but  the  operation  of  the  transit  lines 
should  be  effectively  freed  from  the  menace  of  interruption  through 
strikes. 

(11)  The  danger  that  municipal  operation  might  become  unduly 
burdensome  to  the  taxpayers  can  be  overcome  by  a  proper  organization 
of  responsibility  for  operation  and  construction,  and  by  the  formulation 
and  adoption  of  a  comprehensive  municipal  program  in  which  transit  will 
play  an  important  role,  not  as  an  end  in  itself,  but  as  a  means  to  the  de-- 
velopment  of  the  city  and  the  promotion  of  its  welfare.  The  transit 
system  of  a  city  should  be  treated  as  a  whole  and  its  extension  and  de- 
velopment should  be  dictated  by  considerations  fundamental  to  the  city 
plan.  Local  transit  is  now  recognized  as  being  one  of  the  most  powerful 
socializing  agencies  which  the  city  has  at  its  command.  Any  effective 
city  planning  in  the  true  sense  of  that  term  is  largely  dependent  upon  it. 
If  under  municipal  operation  the  transit  service  as  a  whole  should  fail 
to  be  self-sustaining  at  the  rates  of  fare  deemed  to  be  most  conducive  to 
the  general  use  of  the  service,  it  would  be  no  injustice  upon  the  business 
men  and  land  owners  who  receive  great  benefits  from  street  railway 
transportation,  even  where  they  seldom  use  it  themselves,  to  have  the 
necessary  excess  cost  paid  out  of  taxes. 

(12)  The  danger  that  under  municipal  ownership  private  and  selfish 


THE  TRANSIT  PROBLEMS  OF  NEW  YORK  CITY  27 

interests  might  dictate  the  extension  of  street  car  lines  to  the  detriment 
of  the  general  public  could  be  overcome  by  the  inclusion  of  transit  de- 
velopment as  a  vital  part  of  a  well  coordinated  comprehensive  plan  for 
the  development  of  the  city  as  a  whole.  An  extension  of  street  car  lines, 
whether  under  public  or  private  ownership,  ought  not  to  be  determined 
exclusively  upon  the  basis  of  the  ability  of  each  particular  extension  to 
earn  its  own  living.  Moreover,  any  tendency  toward  the  over-extension 
of  car  lines  would  probably  be  corrected  by  the  adoption  of  a  plan  re- 
quiring that  the  cost  of  all  new  lines  petitioned  for  by  the  residents  of 
the  districts  which  they  would  serve  should  be  paid  by  special  assess- 
ments on  the  property  benefited.  The  theory  of  assessments  for  benefits 
might  even  be  carried  to  the  point  of  requiring  operating  deficits  on  out- 
lying lines,  where  the  traffic  is  thin,  to  be  made  up  by  a  special  tax  upon 
the  real  estate  in  the  districts  served. 

During  the  past  year  municipal  ownership  as  an  unwelcome  but  neces- 
sary way  out  of  the  existing  street  railway  tangle  has  found  prominent 
advocates  even  in  the  ranks  of  the  American  Electric  Railway  Associa- 
tion. But  street  railway  presidents,  managers,  attorneys  and  bankers 
rally  to  the  side  of  private  ownership  and  operation  except  in  a  few  of 
the  most  desperate  cases.  No  matter  what  the  true  interests  of  the 
investors  may  be,  they  have  practically  no  voice  except  through  the 
group  of  men  whose  power,  prestige,  salaries  and  opportunities  for  profit 
depend  mainly  upon  the  continuation  of  private  management.  We  see 
the  same  thing  on  a  smaller  scale  in  public  life  whenever  an  attempt 
is  made  to  abolish  an  office  or  a  commission  that  has  outlived  its 
usefulness.  The  judgment  of  the  incumbent  as  to  the  need  for  the 
continuation  of  the  office  has  to  be  heavily  discounted.  In  like  manner, 
very  little  weight  can  be  given  to  the  opinions  on  municipal  ownership 
of  lawyers,  bankers  and  executives  whose  prosperity  is  fed  upon  private 
control.  The  salaries  of  street  railway  presidents  are  seldom  cut  because 
of  the  financial  distress  of  the  companies,  and  as  for  the  lawyers'  fees 
and  the  bankers'  commissions,  they  swell  in  inverse  proportion  to  the 
security  and  prosperity  of  the  investors. 

The  legal  and  financial  obstacles  that  have  been  placed  in  the  way 
of  the  adoption  of  municipal  ownership  and  operation  of  public  utilities 
in  New  York  are  great,  but  not  insuperable.  Most  of  them  could  be 
overcome  with  comparative  ease  if  once  those  who  formulate  and  ad- 
minister legislation  were  heartily  united  in  an  effort  to  promote  the 
adoption  of  municipal  ownership  as  a  definite  and  comprehensive  policy. 
As  to  the  inherent  administrative  and  political  difficulties,  we  can  only 
say  that  municipal  government  is  already  charged  with  functions  so  vital 
to  the  life,  health,  morals  and  prosperity  of  those  who  live  in  urban 
communities,  that  inefficiency,  extravagance  and  narrow  partisanship 
cannot  be  permanently  tolerated.    The  dangers  that  confront  municipal 


28 


THE  TRANSIT  PROBLEMS  OF  NEW  YORK  CITY 


operation  along  these  lines  are  already  present  in  the  administration  of 
other  municipal  functions,  and  must  be  overcome.  Otherwise,  democ- 
racy as  applied  to  cities  will  prove  a  disastrous  failure.  This  is  not 
the  time  and  New  York  is  not  the  place  to  admit  such  a  result.  The 
present  transit  crisis  is  a  grave  menace  to  the  city's  future.  We  propose 
the  formulation  and  persistent  advocacy  of  a  transit  program  having 
for  its  end  the  complete  municipalization  of  all  rapid  transit,  street 
car  and  bus  line  services  in  New  York. 
Delos  F.  Wilcox  * 
Felix  Adler 
Charles  A.  Beard 
Allan  L.  Benson 
J.  M.  Budish 
Harold  S.  Buttenheim 
John  Collier 
Stoughton  Cooley 
William  J.  Coyne 
Frank  Crane 
Herbert  Croly 
Miles  M.  Dawson 
John  Ford 
Harry  G.  Friedman 
S.  S.  Gold  water 
Percy  S.  Grant 
John  Haynes  Holmes 
New  York,  November,  1919. 


Hamilton  Holt 
John  J.  Hopper 
Abraham  Lefkowitz 
John  Martin 
J.  Howard  Melish 
John  J.  Murphy 
George  Foster  Peabody 
Louis  H.  Pink 
Lawson  Purdy 
Charles  T.  Root 
Mrs.  Maud  Swartz 
Samuel  Seabury 
Laurence  Arnold  Tanzer 
Calvin  Tomkins 
Frank  S.  Tomlin 
John  DeWitt  Warner 
Stephen  S.  Wise 


*  This  discussion  was  first  prepared  by  Mr.  Wilcox  and  then  submitted  to  t>thers 
for  criticism  and  suggestion.  It  has  been  revised  in  the  light  of  suggestions  received 
and  events  that  have  recently  taken  place.  The  signers  other  than  Mr.  Wilcox 
have  consented  to  join  him  in  giving  the  pamphlet  publicity  as  a  basis  for  publi'.- 
discussion  and  appropriate  action.  Copies  may  be  obtained  from  any  one  of  the 
signers  or  by  addressing  Mr.  Wilcox  at  73  Gleane  Street,  Elmhurst,  L.  I. 


f 


( 


POSTSCRIPT 

Mr.  J.  M.  Budish  and  Mr.  Abraham  Lefkowitz,  on  behalf  of  them- 
selves and  their  associates  in  the  labor  movement,  in  order  to  avoid  any- 
possible  misinterpretation  of  their  position  with  respect  to  the  foregoing 
discussion,  desire  to  have  three  points  made  clear: 

1.  If  the  language  used  in  this  pamphlet  should  be  interpreted  as 
inferring  that  the  wages  paid  to  the  transit  employes  are  now  too  high, 
they  wish  to  register  their  emphatic  dissent.  They  state  that  the  prevail- 
ing rate  for  organized  labor  in  New  York  City  at  the  present  time  is  from 
85  cents  to  $1.00  per  hour,  with  an  eight-hour  day  and  a  half  holiday  on 
Saturday,  and  that  the  wages  now  received  by  transit  employes  are  not 
more  than  two-thirds  of  this  amount. 

2.  If  the  language  used  in  this  pamphlet  should  be  interpreted  as 
advocating  the  legal  prohibition  of  strikes  in  transportation  service,  they 
wish  to  express  their  emphatic  dissent.  They  agree  that  strikes  should 
be  prevented  by  removing  the  conditions  that  lead  to  them,  and  are  in 
accord  with  the  suggestions  made  in  this  pamphlet  for  the  removal  or 
elimination  of  such  conditions. 

3.  Affirmatively,  they  believe  that  efficiency  in  public  operation  of 
transit  lines  and  the  prevention  of  strikes  or  serious  differences  will  be 
promoted  by  the  recognition  of  the  right  of  the  employes  to  participate 
in  the  management.  D.  F.  W. 


( 


i 


UNIVERSITY  OF  ILLINOIS-URBANA 

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3  0112  062377657 


